Microsoft CEO Ballmer's Surprise Retirement

In unexpected move, Microsoft said CEO Steve Ballmer will retire within 12 months. Bill Gates is on committee to find replacement.

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Microsoft announced Friday that CEO Steve Ballmer will step down within the next 12 months. The company's board of directors has appointed a special committee to select Ballmer's replacement, a committee that includes Microsoft chairman and co-founder Bill Gates.

"There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a statement. He said he had previously intended to retire "in the middle" of Microsoft's transformation but determined the company needs a leader "who will be here for the longer term."

Indeed, earlier this week, Nomura analyst Rick Sherlund wrote in a research note that ValueAct, a hedge fund that holds almost a 1% stake in Microsoft, could be planning to gain a seat on the company's board via a proxy battle. Calling Microsoft's recent downturn "everything an activist shareholder could ask for," Sherlund suggested ValueAct could influence the company's strategy, with potential agenda items including the release of Office for the iPad, a rededication to enterprise products and perhaps even the sale of its Xbox business.

Such commentary isn't surprising from Sherlund, who advocated many of the same moves earlier this year. But in July, Reuters, citing inside sources, also reported that ValueAct was maneuvering for a board seat. The article said ValueAct is thought to disapprove of Microsoft's move into making its own devices, and that several of Microsoft's top institutional investors had contacted ValueAct to express concern over Microsoft's tactics and execution. It remains to be seen if ValueAct makes a move, but it's clear investor concern has mounted.

That said, Ballmer has successfully developed several new business streams for Microsoft. Most recently, the company has made aggressive moves into the cloud with Windows Azure, Windows Server 2012 R2 and Office 365. Even those relatively critical of Ballmer recognize the potential in these businesses; Sherlund, for example, noted the long-term benefits of Office 365's subscription model, as well as the potential for Microsoft products to tie together more closely via the cloud.

Until he officially steps down, Ballmer will have plenty to keep him busy. Windows 8.1 launches in less than two months, and how well it sells during the holidays could determine the extent to which Ballmer's successor hews to the current CEO's "devices and services" vision. Shortly thereafter, the longevity of the Modern UI will face a test from the enterprise; by 2014, many companies will be scrambling to retire Windows XP, and, in many cases, moving to refresh hardware. The company is also expected to unveil new Surface tablets as well as a Surface-branded smart watch. Unconfirmed projects, such Modern UI versions of Microsoft Office, are also likely to be in the cards.

This is a Perfect time for Balmer to "Bail out" after the last release of Windows 8, and the RT Mess. The Surface is the only useful change. The Desktop is a mess for the corporate unless Windows 8 is highly modified for a regular mouse and keyboard, and the menu's are revamped to make sense. This is Microsoft's Tsunami, and the wave is almost here. It is good to collect the Golden Paracute, and bail before it hits. I am disgusted at the Windows 8 operating system. Forced into it with a purchase of a laptop for my son for collage, it is a mess to navigate to do simple tasks.The Challange? To bring back a logical Desktop tested on users that are inexperienced with computers, find the issues in navigating to connecting printers, launching applications, customizing basic settings. Then work on other markets, Tablet, Xbox, Cloud sevices. Right now, they need to figure out how to get corporate back.

Xbox is the only division at Microsoft that performs very well. And it is the only division that was kicked off by Microsoft engineers defying Ballmer and going rogue in their development efforts. Originally, they stapled some Dell hardware together and built games for that new platform. The ROI is still incredible!Honestly, aside from the Xbox Microsoft really only excels these days in development tools and maybe SQL Server. Everything else either has equally capable alternatives that cost dramatically less or cost less and are better. Microsoft may be better off in the long run to sell off a bunch of divisions, keep a good chunk of shares to keep collecting on revenue, but focus on three or four areas rather than try doing everything and failing at most of it.

That move comes years too late. After Vista and the Windows Phone disasters Ballmer should have been sacked long ago. On top of that, since he is CEO stock is flat and market shares are flat or declining.I just wonder what the requirements for the new CEO will be? Able to jump and scream on stage like a monkey on crack? Excellent at throwing chairs at people? Inept as leader of a tech company? Ignorant towards customer demands? Most ineffective micromanager? Whoever it will be, any village idiot can run Microsoft better than Ballmer has done.

Good analysis by IW's Endler. Steve Ballmer is a forceful business leader, but bluster in the end is no substitute for a good business plan. He's appeared captive to the notion that Microsoft should recapture the lead in consumer electronics. Instead, Microsoft should recognize that its earlier triumph with Windows can't necessarily be repeated. Windows success did lead Microsoft into a sizable position in the enterprise data center. If it no longer leads the consumer parade in the mobile/cloud era, it could still capitalize on and improve its enterprise and enterprise cloud computing position. Instead, it seems determined to exhaust itself trying to recapture consumer leadership. The PC era is over but the Windows Server and Hyper-V virtualization era is still very much underway.

i woud hardly call it a surprise. whith such major scale disasters he scored, retirement was the most common suggestion coming from over 1 billion users.and now, time to kill metro/rt as anyone involved in it was fired...

Uh, the other route is the tablet and phone devices since more people are going that direction, but I think it's obvious that MS has a really rough battle in that direction. I had a wp7 phone and loved it, but I ended up moving to android for various reasons. I've heard great things about people who've actually used the windows (but not RT) tablets, and it's a shame that they don't seem to be catching- I'm honestly not sure I see a path for them there even if they are good products in 'isolation'.

Can someone explain to me why spinning the xbox division off as a separate company would be a good idea? I'm too 'close' to it as a fan of the system and as a game developer to see why that would be a good idea.Making money or not (and I believe it is) it serves as MS long desired gateway into the living room. With the decline of the desktop PC it probably remains one of their two most viable routes long term for revenue, even if it will never be 'office' level funds.

So I wasn't the only person who wasn't a fan.Not that I'm really educated on the details enough to lay it all on Ballmer, but I've felt recently that he hasn't been good for the company... missing the spark somehow.

Ballmer is a man who has spent his time at the helm of MS trying to restore its former market power when he should have been figuring out how to sell software on the merits and to change its reputation from that of a bully to that of a producer of great software for prices worth paying. Hopefully, his successor can make the change, but the corporate culture may be too entrenched.